BofA's Hartnett warns: Global stock markets are trapped in an "overbought" predicament, with technical indicators hitting historic sell signals.

```

Bank of America strategists have issued a clear warning, believing that global stock markets have entered a dangerous “overbought” state.

On January 30, the team led by Michael Hartnett pointed out that although major global indexes continue to hit record highs, a key internal indicator has reached the threshold that signals a potential reversal. Data monitored by the team shows that as of the week ending January 28, as many as 89% of MSCI global stock index constituents were trading simultaneously above both their 50-day and 200-day moving averages. This ratio has surpassed the historical “sell signal” threshold of 88% set by the bank’s model.

Past experience shows that when this indicator breaks above this level, it usually means that market breadth is excessively expanding and the risk of a technical pullback in the short term rises significantly. This sounds a warning for the current heated market.

Deepening Divergence Between Technicals and Fund Flows

In sharp contrast to indexes repeatedly setting new highs, internal market signals have already turned cautious. In the week ending January 28, global equity funds recorded a net outflow of $15.4 billion, indicating that some funds are choosing to cash in profits at historical highs.

However, Bank of America’s Bull & Bear Indicator remains in the “extremely bullish” range thanks to the broad upward momentum in global stock indexes and the robust performance of the credit market. This contradiction highlights a key market divergence: technicals are flashing overbought warnings, capital is beginning to withdraw, but sentiment indicators remain at extremely optimistic levels.

This rare combination of technical, capital, and sentiment factors usually means that internal market momentum is quietly shifting, and apparent strength may mask vulnerability, further underscoring the potential pullback risk accumulating as the market continually hits new highs.

Divergence in Regional Fund Flows

Last week, U.S. equity funds once again attracted funds with a net inflow of $9.2 billion, indicating that U.S. assets still have relative appeal against the backdrop of overall outflows from global markets.

By contrast, European stock markets saw a reversal in fund flows, registering a net outflow of $400 million for the first time in seven weeks, marking a temporary break in the prior sustained inflow trend.

BofA strategist Michael Hartnett made it clear that his top trade recommendation for 2026 is to go long on bonds, international equities, and gold at the same time. This allocation continues his stance of “favoring international equities” since the end of 2024, a view that has been reinforced by the recent underperformance of U.S. stocks compared to international markets.

Risk Warning and DisclaimerThe market involves risks, and investments should be approached with caution. This article does not constitute personal investment advice, nor does it take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their particular circumstances. Investments made based on this information are at one’s own risk.

```